Andhra Pradesh: Builders bogged by GST

Rajahmundry: GST blues still haunt builders, home buyers and tax officials as there is mismatch of assessment of Input Tax Credit (ITC) among them in the state. Even after five months of the launch of Goods and Services Tax by the Centre on July 1, there is no clarity on assessing the ITC. The Centre claims that builders can get ITC to the tune of six per cent. The builders  say that they are getting ITC between 4.5 and five per cent only. Some tax officials, however, claim it ranges between eight and nine per cent.

Builders buying construction material for a housing project or a commercial establishment pay GST fixed by the Centre. For cement, they pay 28 per cent GST while for inputs like steel, metal, electrical wires and appliances and granite/marble among others, they pay 18 per cent GST. As per GST norms, builders are supposed to pay GST of 12 per cent on the total cost of a housing project including the cost of land. They get ITC of 4.5 per cent to five per cent against Centre's claim of six per cent. In order to attract buyers, most builders offer ITC to the tune of six per cent to prospective customers even though they get lower ITC while bearing the margin of one per cent to 1.5% on their due sustain tough competition in the market.

The builders allege that there is no clear formula on assessment of ITC as a section of tax officials are unable to calculate the ITC in its true spirit while home buyers develop suspicion on builders saying that they are not passing on financial benefit to them to bring down the cost of the housing unit. For instance, Visakhapatnam based central tax and customs deputy commissioner N. Srujan Kumar had released a note recently giving comparative cost of a flat Pre and Post-GST. In Pre-GST era, when flat cost was Rs 30 lakhs, its cost was escalated to Rs 31.72 lakh by imposing 4.5% of service tax (Rs 1.35 lakhs) and Vat of 1.25% (Rs 37,500).  In Post-GST, for flat cost of Rs 30 lakhs, GST of 12% to the tune of Rs 3.60 lakh added which comes up to Rs 33.60 lakhs.

However, ITC was shown to the tune of Rs 2.86 lakhs which comes up to more than nine per cent and it was deducted from total cost of Rs 33.60 lakhs and the final cost was pegged at Rs 30.73 lakhs. The official drew comparison of flat cost pre-GST and post-GST and claimed that it was cheaper in post-GST era.  The builders contradicted official's claim of getting more than nine per cent of ITC and said that the official had taken notional value of ITC instead of reality which comes up to 4.5%.

The builders also turned critical on land cost abatement to the tune of one-third fixed by the Centre and maintain that the land cost varies from place to place and it can never be universal all over the country at any time. The builders are offering 40% to even 70% of cost of the project to the land owner as the land is very scarce to find and its cost is rising abnormally especially in metro cities. Credai AP chapter vice president Buddiga Srinivas said, "Though the Centre has launched GST to bring uniform taxation and ensure transparency, it is not working that way. We are facing harassment from tax officials while home buyers look at us suspiciously with regard to the ITC payment.”

Let's block ads! (Why?)